Billion Dollar Unicorns: Vancl On A Roller Coaster Ride

A Forrester report released earlier this year estimates the Chinese e-commerce market to grow 20% annually from $307 billion in 2013 to more than $1 trillion by 2019. The growth in the market is being driven by the penetration of Internet in the country as well as adoption of mobile devices. But while the market statistics may be strong, it has not necessarily been an easy ride for all. Billion Dollar Unicorn club contender Vancl shows how difficult things can be.

Vancl’s Offerings

Beijing-based Vancl.com was founded in 2007 by Chinese entrepreneur Chen Nian with the mission of becoming the leading retailer for men’s apparel in China. Prior to setting up Vancl, Chen Nian had founded B2C retailer Joyo and sold it to Amazon for $75 million in 2000. Vancl began their e-commerce services by offering low cost T-shirts and men’s shirts available for sale through their website and phone orders. Within two years, they had expanded to women’s and kid’s apparel. Today, they offer fashion apparel, shoes, and accessories at low to mid-range prices. Vancl lets consumers buy through their two sites Vancl.com, which sells proprietary brand fashion label and Vjia.com, which is their open platform to sell products from other brands. By 2010, Vancl had become the fifth largest online retailer in China.

Vancl’s Financials

Vancl has seen strong revenue growth, but profitability has been a matter of concern. According to market reports, revenues were at 120 million RMB (~$19.1 million) back in 2008 and soon grew to 1.2 billion RMB (~$191 million) by the year 2010. By 2011, Vancl was eyeing an annual turnover of 10 billion RMB (~$1.58 billion) and an IPO in the US. But suddenly, things took a turn for the worse. Vancl had accumulated a loss of 250 million RMB (~US$39.7 million) during the first three years of their operations. And then, in 2011, losses increased to 600 million RMB (~$95.3 million), almost sending the business under. The company recorded nearly 1 billion RMB (~$160 million) worth of stock in the warehouse and they had to sell off the remaining stock just to stay afloat. Obviously, plans of the IPO were cancelled.

Over the past years though, Vancl has recovered. Reports suggest that over the past few years, Vancl has revisited their portfolio and sold off loss-making offerings while focusing only on the profitable ones. Last year, they also sold their parcel delivery service Rufengda, which it had set-up to ensure a speedy delivery of their products. Analysts believe that with all that restructuring, Vancl is now probably profitable.

Meanwhile, Vancl has remained venture funded with $470 million in investments from IDG, Temasek Holdings, CITIC PE, Hotung Venture Group, Tiger Global Management, SAIF Partners, New Margin Ventures, Ceyuan Ventures, IDG Capital Partners, and Qiming Venture Partners. Their last round of funding was received in 2013 when they raised $100 million at an undisclosed valuation in a round that also included participation from Lei Jun, co-founder of Xiaomi. Valuations may not yet be as high as the $3 billion mark that the market had pegged for Vancl back in 2011 when they were about to go public. But with their financials in better order, they are probably ready to rejoin the Billion Dollar Unicorn club. Rumors suggest that they may be looking to go public again.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

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Photo credit:  daniel zimmel/Flickr.com.